Tax Benefits on Tuition Fees: Explainer Guide

Educating a child is increasingly expensive due to the rising cost of education. Many individuals find it challenging to save due to the significant expenses associated with education. However, the Income Tax Act 1961 provides tax benefits that can be claimed under Section 80C. The Act specifically outlines provisions for tuition fee tax deductions and clarifies which expenses are not included. In this article, we will explore the tax benefits available for tuition fees, including eligibility criteria, the claiming process, and other relevant details.

Tax Benefit on Tuition Fees: An Overview

To promote education among the population, the Income Tax Department has implemented several tax rebates and exemptions for tuition fees. Two provisions facilitate tax exemptions on tuition fees, namely Section 80C and Section 10(14). These provisions serve to assist taxpayers in lowering their taxable income. The Indian government permits individuals to claim deductions for tuition fees paid on behalf of their children. These provisions for tuition fee tax benefits are discussed below: 

• Section 80C: The maximum deduction limit permitted under Section 80C is Rs. 1.5 lakhs. If a taxpayer’s primary concern is tuition fees, they can allocate the entire 80C limit for tuition fees. However, if the taxpayer has additional financial concerns, such as life insurance, investments, or provident fund contributions, they must allocate the total deduction limit of up to Rs. 1.5 lakhs according to their priorities.

• Section 10(14): In India, taxpayers employed within the country can claim tuition fee deductions under Section 10(14) of the Income Tax Act, known as the “Children’s Educational Allowance.” This provision offers tax benefits of up to Rs 1200 annually per child, applicable to a maximum of two children.

Eligibility for Tuition Fees Tax Relief

To claim the benefits of student tuition tax deduction, the taxpayer must meet the eligibility criteria under Section 10(14) or Section 80C as applicable. Here are the eligibility criteria for both tax benefit provisions:

Eligibility Under Section 10(14)

• This tax benefit on tuition fees is applicable only to individuals employed in India.
• Deductions for education fees are valid for expenses incurred in India.
• There is no minimum age requirement for claiming Children’s Education Allowance.
• Children without special needs can claim reimbursement up to the age of 20, while children with special needs can claim up to the age of 22.
• The school or institution must be recognised by an educational authority.
• Tuition fee deductions apply for up to two children. In a family with two individual taxpayers, deductions can be claimed for up to four children attending schools in India.
• Single parents and unmarried guardians can also claim deductions if they send their children to authorised schools in India.

Eligibility Under Section 80C 

• Tax deductions for tuition fees under Section 80C are available to individual taxpayers and Hindu Undivided Families (HUF) but not to corporations.
• The maximum deduction under this provision is allowed for up to Rs. 1.5 lakhs per financial year. Each taxpayer can claim deductions for up to two children. Consequently, if both parents are taxpayers, they can collectively claim deductions for a total of four children.
• Tax deductions can be claimed for tuition fees paid to educate your children, but not for your own or your spouse’s educational expenses.
• The deductions apply to tuition fees for full-time courses in schools, and undergraduate and postgraduate institutions. Fees associated with part-time courses are not eligible.
• The educational institution where the child is studying must be affiliated with a recognised educational authority.

Educational Expenses Not Eligible for Tuition Fee Deduction

While assessing the amount of tax benefit on your child’s tuition fees, some educational expenses are not eligible for deduction. Below are the key expenses that are not considered part of eligible tuition fees: 

• One-time admission fee
• Annual fee
• Redemption fee
• Transportation costs
• Smart class fee
• Dormitory fee
• Additional class fee
• Fees for extracurricular activities
• Mess fee
• Library fee
• Stationary costs
• Donations to schools/universities
• School development costs
• Late payment fees for tuition
• Expenses for sports and activity classes
• Cost of coaching or private lessons.

As per section 80C, there are some expenses that despite relating to education, are not considered for tuition fee tax deduction under Section 80C. These are:

• Part-time study fees
• Fees for education at international colleges/universities.
• Tuition expenses for yourself, your spouse, siblings, and other family members (excluding your children).
• Educational costs for Indian schools located outside India.

(Please note that the list mentioned above is not exhaustive.)

How Does Tuition Fee Tax Deduction Work?

The tuition fee tax rebate allows parents to claim tax benefits on tuition fees for their children. Under Section 80C, taxpayers can claim up to Rs. 1.5 lakhs as a tax deduction. An example below helps you understand how the tuition fee tax benefit works:

Let’s take the case of Mr. Karan, who is employed and has two children. He allocates Rs. 45,000 for his son’s annual tuition and Rs. 35,000 for his daughter’s education, resulting in a combined annual tuition expenditure of Rs. 80,000.

As a result, Mr. Karan can utilise this tuition payment as a deduction when filing his income tax return. This provision not only allows him to reduce his taxable income but also facilitates tax savings.

Procedure to Claim Tax Benefits on Tuition Fees

While claiming a tuition fee tax deduction, it is important to remember that the deduction limits under Section 80C and Section 10(14) differ. Depending on the applicable provision, you can follow the steps below to claim the tax benefit on tuition fees:

• Provide your employer with the receipt issued by the educational institution for the full payment made within the current financial year. This submission must be made before the financial year’s end.
• Attach the proof of tuition fee payment in Form 12BB along with all other necessary proofs at the end of the respective fiscal year. 
• Non-salaried employees must claim the deduction by declaring the fee paid under Section 80C when filing their income tax returns using the VI-A schedule.